A Senate committee is investigating whether $158 million paid by billionaire investor Leon Black to disgraced financier Jeffrey Epstein for tax and estate planning services should have been classified as a gift, as part of a broader investigation into tax evasion schemes by wealthy individuals, according to a letter reviewed by The New York Times.
In addition to the fees Mr. Black said he paid Epstein, the Senate Finance Committee is looking into several funds that Mr. Black used to provide for taxes and advice that Mr. Epstein gave on art purchases, according to the letter sent to the private equity mogul Monday by the committee chairman, Sen. Ron Wyden.
Mr. Wyden, an Oregon Democrat, wrote that the committee was not satisfied with the information provided thus far by Mr. Black, one of the founders of Apollo Global Management, and asked for his cooperation.
“There remain a large number of open questions regarding the tax evasion scheme I implemented with Epstein’s assistance, including whether the exorbitant payments to Epstein should have been classified as gifts for federal tax purposes,” the senator wrote. Gifts above the annual value threshold are subject to federal taxes ranging from 18 to 40 percent.
A spokesman for Mr Black, 71, said he “cooperated extensively with the commission”. Spokesman Whit Clay added: “The transactions referred to in the committee letter were lawful in all respects; they were designed, examined and carried out by reputable law firms, tax advisors and other advisors; and Mr. Black has paid in full all taxes owed to the Government.”
In 2020, a law firm found that Mr. Epstein’s work had saved Mr. Black and his four children $2 billion in estate and gift taxes. Dechert, who was retained by the Apollo board to review Mr. Black’s dealings with Mr. Epstein, found that he had done nothing wrong. Mr. Black stepped down as Chairman and CEO of the private equity giant in 2021.
The Senate Finance Committee investigation is part of an investigation into tax havens used by the ultra-rich to “avoid or evade paying federal taxes, including gift and estate taxes,” according to the 16-page letter. In April, the commission I requested information from Harlan CrowBillionaire real estate developer tax treatment Gifts to Justice Clarence Thomas of the Supreme Court.
Mr. Wyden sent the letter just days after the Times reported that Mr. Black, who is worth an estimated $9 billion, had avoided a potential lawsuit by the US Virgin Islands with a settlement of $62.5 million.
The settlement, reached in January but not disclosed at the time, stemmed from possible allegations that the Virgin Islands developed against Mr Black during the three-year investigation into Mr Epstein’s sex trafficking operation, which was partly from his private residence on St Thomas Island.
According to the settlement, “Jeffrey Epstein used the money Black paid him to partially fund his operations in the Virgin Islands.”
Mr. Black was a longtime social and business acquaintance of Mr. Epstein, who committed suicide in 2019 after being arrested on federal sex trafficking charges. Lawyers for his victims estimated that Mr. Epstein, a college dropout with little training in tax and real estate work, sexually assaulted 200 young women, many of them teenagers.
The Senate committee began investigating Mr. Black in June 2022 with a letter to Apollo, and then sought information from two large law firms that worked with Mr. Black. Lawyers told the committee he was unwilling to answer questions about the payments to Mr Epstein.
Mr. Black’s lawyers provided some information about several grantor-held annuity trusts, or GRATs, that were set up in 2006 to enable him to transfer shares in Apollo to his children in a tax-advantaged way — while allowing him to continue to earn income from the investment. But Mr. Wyden said Mr. Black did not provide enough information for the committee to determine whether the work done by Mr. Epstein was a legitimate tax strategy.
And starting in 2014, Mr. Epstein supposedly helped restructure the trusts to avoid paying $1 billion in endowment and estate tax to Black and his family, according to Deckert’s report.
GRAT is a sophisticated investment vehicle that allows a person to continue to collect income from assets of all kinds—including stocks, real estate, and the arts—and then hand them over to family members without paying the large endowments or estate taxes typically associated with such transfers.
Mr. Epstein often boasted that he was an expert in such funds and collected huge fees to help a small number of wealthy people save money on taxes.